The major sub-sectors for manufacturing that posted growth in January were food, beverage and tobacco products (14.4 percent); petroleum products, chemicals, rubber and plastic (2.1 percent) and electrical and electronic equipment products (4 percent).

As for the mining sector, the growth was supported by the increases in crude oil index and natural gas index which were up 1.8 percent and 1.5 percent respectively.

Nomura Global Research said in a note Tuesday, despite a favorable base effect from the lunar new-year holiday effect, the IPI growth was well below expectations when compared with consensus and Nomura forecasts of 6.8 percent and 7 percent respectively.

The main drag for IPI was manufacturing industrial output, which was contrasted with trade data that showed a jump in manufactured export volume growth in January, according to the research house.

"Overall, this supports our forecast for gross domestic product growth to moderate to a still-solid 5.5 percent in 2018 from 5.9 percent in 2017. This should further reduce the need for more rate hikes and we continue to expect Malaysian Central Bank to leave its policy rate unchanged for the rest of the year," it said.

Nomura opined that the window for further rate hikes is closing as it expects the general election to be called in late April or early May, and fiscal tightening in the second half.

Despite the below-expected IPI growth, MIDF Research remains optimistic on Malaysia's IPI performance this year and projects it to grow at 3.5 percent to 4.5 percent during the first half.

"The encouraging trend of IPI growth in 2017 is expected to continue for 2018 given that robust external trade performance continues and gradual increase in commodity price will boost up industrial activity in Malaysia," it said.

The Malaysian research house also expects spill-over effects from the United States tax cuts that will drive up global trade activities this year.

"Hence, based on solid uptrend in trade activities and further steady domestic consumption, we expect industrial production growth to hit 4.3 percent in 2018," it added.